Sanistål A/S : Interim Financial Report for 1st half 2021

Interim Financial Report

	Sanistål Interim Financial Report	2
| Management's Review | Consolidated Financial Statements | Statement	H1 2021

Contents
Management's Review
Management Letter...........................................................	3
Financial review......................................................................	5
Financial Highlights and Key Ratios..........................	7
Forecast for the year 2021 .........................................	8
Significant risks......................................................................	9
Events after the half year............................................	9

Consolidated Financial Statement
Income Statement............................................................	10
Balance sheet.......................................................................	11
Cash flow statement.....................................................	12
Definition of supplementary financial
highlights .................................................................................	13
Statement
Managment's Statement .........................................	14

	Sanistål Interim Financial Report	3
| Management's Review | Consolidated Financial Statements | Statement	H1 2021

Management Letter

Stable growth trends

Sanistål saw a satisfying second quarter and a sound first six months with top-line growth, better margins, cost savings and a higher operating profit.

The group's revenue increased by 11% in Q2 2021 and by 7% during the first half of the year. Growth has now been stable for three quarters in succession, which even exceeds the level before COVID-19. Demand has returned after last year's lockdowns in Denmark, yet we are growing faster than the industrial market and we have started to retake market shares in the construction industry and the building trades.

The Danish parent company - our biggest entity

• is particularly responsible for this growth. Sales rose 9% in the first half-year and growth reached 12% in Q2, when multiple daily and weekly rec- ords were set for the number of dispatches from the central warehouse. The reasons for these trends include the fact that:
• we have boosted and targeted our sales
• we have convinced more customers to do business online
• we have growth in our conceptual sales

Our recent 18-month Genesis strategy efforts have also widened the parent company's margins after optimising the organisation, procure- ment, logistics, digital platforms, systems, product mixes, etc. Together with strict cost manage- ment, this enabled us to increase the profit ratio (EBITDA-margin) before one-off effects and the adjustment of our holiday-pay obligations in parent company from 4% in H1 2020 to 6%.

Our East European business is doing well, although the top line fell during H1. This is explained by the fact that we ran a large project that generated a lot of revenue last year - even when the COVID-19 crisis was peaking - but with low margins. This year, the activities in Lat- via, Lithuania and Poland have more substance and breadth. Moreover, we sold a property in Latvia for a profit of DKK 4.8 million. This resulted in improving our EBITDA margin from 5% to 6% in H1.

Overall, the Sanistål Group - which also includes Serman & Tipsmark - improved its H1 operating profit (EBITDA) to DKK 104 million before one-off effects and the adjustment of our holiday pay

obligations, compared to DKK 64 million in H1 2020.

After one-off effects, comprising expenses for store closures and organisational changes, as well as adjustments to holiday pay obligations, the reported EBITDA was DKK 77 million, compared to DKK 48 million for the same period of last year, in other words, a 60% improvement of the EBITDA.

Addressing challenges

We're on the right track and customer profita-bil- ity has had a strong focus in the first half of the year and the organization in the parent company has taken on the new data insight. This is crucial for our ability to keep improving for the benefit of customers, suppliers and shareholders.

In four out of five customer categories, revenue and earnings were satisfactory and higher than last year. We continue to face challenges in one of our customer categories which we must manage to improve, including by optimising our cus- tomers' value chain, as well as our own. In addi- tion, we are focused on continuing to improve our working capital as well as our rate of effi- ciency.

We are closely monitoring global market trends in terms of price increases from suppliers and any signs of pressure on supply lines. We will make every effort to ensure the highest level of product availability for our customers.

Forecast for 2021

In H2 2021, we will launch a number of new Genesis initiatives to ensure continued progress: new products and services, additional digitalization and enhanced data utilisation, new go-to- market models and the streamlining and installation of AutoStore in the central warehouse where we are ahead of schedule. These initiatives will have an impact in earnest in 2022.

In May, we raised our expectations for operating earnings (EBITDA) in 2021 to DKK 150-180 mil- lion. Based on the better-than-expected results in the first half of the year and the positive market outlook for the second half of the year, expectations are now further adjusted upwards to a reported operating earning (EBITDA) of DKK 160- 190 million, a substantial increase over the DKK 114 million we achieved in 2020.

Christian B. Lund

CEO

	Sanistål Interim Financial Report	4
| Management's Review | Consolidated Financial Statements | Statement	H1 2021

Management Letter

Status of Genesis

	Sanistål Interim Financial Report	5
| Management's Review | Consolidated Financial Statements | Statement	H1 2021

Financial review

Financial review

Income Statement

Revenue in H1 2021 amounted to DKK 1,729 million, compared to DKK 1,619 million in the same period of 2020, equating to 7% growth.

A high level of activity in all customer categories of the Danish business enables revenue growth in H1 2021 that is 9% higher than in H1 2020. As revenue generated by the East European business was affected by an extraordin-arily high level of project activity in 2020, revenue declined by 5%.

The positive trend over the past three quarters was further enhanced in Q2 2021 by revenue growth of 11%.

The gross profit ratio was 24.3%, a 0.9% in-

GROUP

DKK million	Q2 2021	Q2 2020	Q1 2021	Q1 2020
Net revenue	867.9	785.2	1,728.8	1,619.2
Gross profit	210.2	181.7	420.3	379.3
Other operating income	5.7	1.9	6.8	5.1
Other external costs	-29.3	-30.2	-58.8	-63.5
Payroll costs	-150.2	-137.4	-290.8	-272.6
EBITDA	36.4	16.0	77.5	48.3
One-off effects	2.7	9.2	8.6	14.5
EBITDA before one-off effects	39.1	25.2	86.1	62.8
Gross profit, %	24.2 %	23.1 %	24.3 %	23.4 %
EBITDA-margin before one-off effects, %	4.5 %	3.2 %	5.0 %	3.9 %

Net revenue - DKK million

2.500

2.000

1.500

1.000

500

-

H1:19 H2:19 H1:20 H2:20 H1:21

Remaining		Divested activites

EBITDA - DKK million

90

70

crease compared to H1 2020. This positive growth of the gross profit ratio is due to the impact of Genesis strategy initiatives in the form of procurement optimisations, initiatives targeting new customers and distribution optimisation. It was still possible to mitigate the impact of price increases for a number of raw materials, which had a limited effect on the half-year.

Other operating income increased by DKK 2 million to DKK 7 million in H1 2021. The divestment of a property in Eastern Europe had a positive DKK 5 million impact on H1 2021, whereas H1 2020 was affected by income from system operations of divested steel activities. Income totalled DKK 4 million.

Other external costs were DKK 5 million lower than in H1 2020, due to strategic store closures, lower sales costs during the 2021 lockdown and a generally strict cost management.

Payroll costs increased from DKK 273 million to DKK 291 million in H1 2021. In 2021 Sanistål chose to adjust its holiday pay obligations on a monthly basis based on employees' actual outstanding holiday pay and, adjusted for this, payroll costs were DKK 273 million, which is at the same level with the same period of the previous year, despite rising activity.

One-off effects totalled DKK -9 million, compared to DKK -15 million in H1 2020, primarily due to severance costs, which is part of the Genesis strategy.

One-off effects
(DKK million)	H1 2021	H1 2020
Other operating income	4.7	-
Payroll costs	-12.3	-12.7
Other external costs	-1.1	-1.8
Total	-8.6	-14.5

Furthermore, the divestment of a property in the East European business is classified as a one-off effect in H1 2021. See definitions on page 13 for more details.

The EBITDA before one-time effects in H1 2021 amounts to DKK 86 million, compared to DKK 63 million in 2020. The EBITDA margin - adjusted for one-off effects and the adjustment of holiday pay obligations in H1 2021 - amounted to 6%, or a two percentage point increase compared to 2020.

Depreciation and amortisation in H1 2021 amounted to DKK 63 million, compared to DKK 65 million in 2020, primarily caused by strategic store closures.

Net financial costs amounted to DKK 6 million, declining by DKK 2 million compared to H1 2020, as a result of a lower level of bank debt during the period.

50

30

10 -10

H1:19	H2:19	H1:20	H2:20	H1:21
		Remaining		Divested activites

Interest-bearing debt, net

- DKK million

500

400

300

200

100

-

H1:19 H2:19 H1:20 H2:20 H1:21